Emira Property Fund makes a play for SA Corporate Real Estate
Emira Property Fund, the owner of premium offices such as Bryanston’s Knightsbridge Manor and Hyde Park Lane, plans to buy out SA Corporate Real Estate in a deal that would create a group worth about R15.5bn, showing that consoli dation is gathering momentum in the listed real estate sector.
Emira, led by CEO Geoff Jen nett, has spent the past two years getting rid of its older, poorly performing SA offices and expanding into the US, which has resulted in a better – share price and- dividend growth. Its share price grew nearly 10%in 2018 while the SA listed propertyindex lost 32%.
While a group of property funds had expressed an interest in buying SA Corporate, it was anyone’s guess who would make the first formal bid, said Keillen Ndlovu, head of listed property funds at Stanlib.
Emira said it plans to offer 0.25 of its shares for every issued SA Corporate share. That ratio implies a 23.2% premium basedon the companies’ closing prices on June 6, it said. Emira COO Ulana van Biljon says Emi ra believes it and SA Corporate have synergies that will benefit both companies’ shareholders
“We feel that we can add value through this takeover. We have expressed our intention and will nowwait for SA Corpo rate’s boardto respond.
“Both Emira and SA Corpo rate will do due diligences as the process continues. We will pre sent a clearstrategy should our bid prove successful, explaining what we would do with the dif ferent businesses within SA Corporate,” Van Biljon said.
SA Corporate, which owns a mix of small retail centres, a -_ large portfolio of inner-city housing, a storage business and smokestack factories, has been through challenges recently
Its CEO, Rory Mackey, and financial director Antoinette Basson resigned suddenly in May, but the company has not provided shareholders with rea sons for the resignations. They are serving three-month notice periods and no replacements have been announced.
The company ‘s most recent financial results were also dis appointing, with its dividend shrinking 6% in the year to December to 4222c a share compar ed with 44.92¢ a share for the 2017 financial year, thanks largely to negativ e rental reversions across its portfolio.
WE FEEL WE CAN ADD VALUE. WE HAVE EXPRESSED OUR INTENTION AND WILL NOW WAIT FOR SA CORPORATE’S BOARD TO RESPOND
Mackey said in March that the company would need to sell some of its underper forming offices, which were experienc ing high vacancies.
The rent for the company ‘s new industrial leases fell 13.5% on average, while it dropped 4.6%on average forits retail and 15% on average for its office leases. However, its new retail leases were signed at rents of 7.17%higher on average
Ndlovu said the proposed takeover is positive for the market. “It helps to tidy up the sector and creates a fund with more scale and better liquidity,” he said
Emira’s market capitalisation is R7.lbn, while SA Corporate’s is R8.3bn.
Institutional investors have been encouraging smaller property funds to consolidate in 2019, as they say there are too fewlarge funds and numerous small ones
Emira’s shares closed 2.88% lower at R13.49 on Wednesda y while SA Corporate closed 2.74%higher at R3.37